Why You Should Evaluate Buying the Dip in Adobe Stock

ADBE is now down over 18% in 2022

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Adobe Inc. (NASDAQ:ADBE) stock is clinging close to its year-over-year breakeven, though it's lost 18.5% this year alone, thanks in part to pressure at the 30-day moving average. The stock seems to be on the rebound from yesterday's annual low of $416.81, however, as it looks to eke out its second-straight close above the 10-day trendline since the beginning of February. 

adbe feb 25

Options traders remain optimistic, though. This is per ADBE's 10-day call/put volume ratio of 1.31 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands in the 96th percentile annually. In other words, there's been a healthier-than-usual appetite for long calls of late. 

Analysts have echoed this sentiment. Of the 20 in coverage, 17 hold a "strong buy" recommendation. This is even after the security got hit with a bear note from UBS in early January. 

Meanwhile, the software company’s valuation is on the higher end, with Adobe stock trading at a forward price-earnings ratio of 31.85 and a price-sales ratio of 13.49. However, ADBE continues generating an impressive growth rate, making its valuation of $209.04 billion seem much more appealing.

ADBE has increased its annual revenues 23% since fiscal 2020 and 75% since fiscal 2018. The software company has also increased its annual net income 86% since fiscal 2018. In addition, Adobe is estimated to grow revenues and earnings by 14.9% and 18.1%, respectively, for fiscal 2022. This would mark incredible growth for a mega-cap stock.

Overall, Adobe stock presents a relatively safe option for investors looking for a growth stock to hold long-term. Nonetheless, the runs the risk of depreciating more in the short-term, possibly allowing for a better entry price.


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